Call to scrap triple-lock guarantee – former pensions minister
Since 2010, state pensions have risen annually by the higher of inflation, average earnings or a minimum of 2.5%.
The basic or old state pension is currently set at £119.30 per week, having last risen by 2.9% based on the higher earnings figure, while the new flat rate state pension which came into effect in April 2016 stands at a maximum of £155.65 per week. Both come under the triple lock guarantee.
However, those who receive the additional state pension aren’t protected by the same safeguard. Instead their pensions are increased in line with inflation.
Baroness Altmann told the Observer newspaper that the minimum 2.5% element of the guarantee should be scrapped from 2020 as it’s simply too costly, and pensions should be protected by the higher rate of inflation or average earnings growth instead.
Andrew Pennie, head of pathways at Intelligent Pensions, said: “The triple lock and the current low inflation economy mean that state pensions are increasing at 2.5% per annum and therefore growing in real terms.
“As Ros points out, over time this can’t be sustainable and why should state pensions grow in a low inflation economy but remain flat in a higher inflation economy? Given that inflation and growth in average earnings could become negative, we believe a double lock would be unacceptable and perhaps the triple lock can remain, and is in fact necessary, provided the 2.5% escalation rate is reviewed and better reflects current economic conditions.”
Pennie added that the triple lock is part of the government manifesto and has become something of a “Tory flagship policy”, protecting the UK’s OAPs during times of need.
“To break the triple lock becomes another broken political promise, more damaging because it would likely cost votes. However, as the cost of providing it continues to increase and the government comes under financial pressures from elsewhere, it will be difficult for the triple lock to continue in its current guise.”
Kate Smith, head of pensions at Aegon, said she welcomed the government’s confirmation that it has no plans to remove the triple lock ahead of 2020, but said there is much distrust of the government’s commitment to state pensions among the different generations.
In recent research, it found that one third of the UK population believed the state pension will be at a less generous level, while a tenth believed there will be no state pension at all when they reach retirement. Further, 70% do not trust the government to make decisions fairly between workers and retirees when reforming state pensions.
“People need trust in state pensions so they can determine how much they need to save in addition to meet their retirement aspirations. It’s important that state pension policy is fixed for at least five years, and in some regards for far longer, giving certainty to pensioners and savers alike.”